SC refuses to order SIT probe into Adani firms

The Supreme Court on Wednesday refused to order a separate probe into the allegations of accounting fraud and stock manipulation against Adani Group companies, first aired in a report by US shortseller Hindenburg Research in January 2023, holding that there was no material to show “glaring, wilful or deliberate inaction" by the Securities and Exchange Board of India (Sebi) in carrying out its investigation nor anything to suggest regulatory failure by the market regulator.

- Utkarsh Anand

Noting that the Hindenburg report or any other unsubstantiated news report cannot be treated as conclusive proof of the inadequacy of Sebi's probe, the top court shot down a plea jointly made in a bundle of petitions seeking the creation of a Special Investigation Team (SIT) to investigate Hindenburg's allegations, and maintained that the reliance on newspaper articles or reports by third party organisations as the basis for questioning a comprehensive investigation by a specialised regulator does not make sense.

Apart from the Hindenburg report, reports by Financial Times and OCCRP (a network of journalists) in August mentioned the alleged violation of Minimum Public Shareholding (MPS) and other regulations by Adani group companies, using 13 overseas entities to effect transactions in stock. Indian stock market laws require a listed company to have a minimum public shareholding of 25% with the objective to keep a free float available for price discovery of stocks.

"The petitioners cannot assert that an unsubstantiated report in the newspapers should have precedence over an investigation by a statutory regulator whose investigation has not been cast into doubt on the basis of cogent material or evidence... In fact, to the contrary, the course of conduct by Sebi inspires confidence that Sebi is conducting a comprehensive investigation," held a bench, led by Chief Justice of India Dhananjaya Y Chandrachud, adding that petitions that lack adequate research and rely on unverified and unrelated material tend to, in fact, be counterproductive to the public interest jurisprudence.